WASHINGTON —
Anyone familiar with the New York or Miami real estate markets knows the buying power of Russia’s moneyed class – from the super-rich to the merely well-off.

But two alarming trends in the Russian Federation – the steady build-up of jingoistic rhetoric from President Vladimir Putin and a sharp downturn in the economy – are significantly altering the investment decisions of Russia’s wary elite.

And with tensions over Ukraine on the rise, Russian investors are changing their strategies within the American market. That's according to U.S.-based real estate agents and lawyers who cater to clients from the former Soviet Union.

“The high times are over,” said Edward Mermelstein, a New York lawyer who represents foreign investors in the U.S., including many Russians.

The same year, composer Igor Krutoy also broke records when he bought a $48 million condo at the Plaza Hotel – one of three units he owns in the building.

In Miami, while Latin Americans – especially Brazilians – have driven the recovery of the city’s once-battered real estate market, Russian millionaires made headlines with their taste for giant waterfront mansions.

“The Russians have elevated the Miami market quite a bit,” said Jill Eber, a local real estate broker whose agency caters to “high-end residential properties and the finest communities.”

But the last few months have brought a significant change, according to Mermelstein. "It's now mainly a flight to safety in American markets,” he said.

Investors on edge

In an inflammatory speech to Russia’s parliament last month, Putin referred to “a fifth column” – a “disparate group of national traitors” – creating turmoil inside the country.

The March 18 speech took place two days after the Crimean referendum, and, for many observers, signaled a new campaign against those not on board with Russia’s new expansionism.

“We already have people who, in the past, would ask to find apartments for their child studying at [New York University], now requesting bigger places – maybe the wife will come with a second kid, maybe the whole family,” said Mark Reznik, a broker at Broadway Realty in New York.

“Smart people see the writing on the wall with all the populist propaganda on Russian television,” he said. “They understand we are just in the first stages. They have begun looking to emigrate.”

Reznik said he expects a new wave of clients from Russia who will “try to leave as quietly as possible” since it is now “unpopular to have anything to do with America over there.”

Safe haven

The oligarchs who acquired massive wealth during the privatization of Russian state industries in the 1990s, and from high oil prices thereafter, have long sought safe investments in the West.

That trend has accelerated as Russia’s $2 trillion economy is now in virtual free fall.

The rating agency Standard & Poor’s Friday cut Russia’s sovereign debt rating to just one step above “junk” status, citing the destabilizing effects of capital outflows from Russia, which it said had reached nearly $51 billion in the first three months of 2014.

The ruble is down 9.1 percent against the dollar this year and the stock market has plunged.

On top of that, the U.S. and European Union may widen economic sanctions to include key financial and energy sectors in Russia, which they blame for stoking unrest in eastern Ukraine, a charge Moscow denies.

Reznik acknowledged the Ukraine crisis has resulted in “a few deals being postponed,” but he and other sources described the current situation as a temporary pause rather than a slowdown in U.S. investments.

“Unfortunately, our business increases when there is instability in other places,” Mermelstein said.

During a two-year period ending in February 2014, his office transacted over $2 billion in condominium purchases by foreign buyers, 25 percent of which, or $500 million, originated from Russian investors.

Mermelstein said all of these were cash deals and that, in the wake of the Ukraine crisis, virtually every one of his transactions has been financed by money already moved out of Russia to offshore banks.

“We’ve definitely felt a big impact from the instability of the Russian [financial] markets since [Russian buyers] are such a big part of the high-end [real estate] market in New York – especially Manhattan – and Miami,” he said.

Decorative artwork stands in front of the 55-foot long swimming pool at the Versace mansion in Miami Beach, Fl., July 23, 2013.

For the last six months, his firm, Rheem Bell & Mermelstein, has seen a noticeable shift from ultra-luxury ($20 million and up) residential purchases for personal use to less expensive ($3-4 million), more easily disposable investments designed to generate rental income, he said.

That trend was confirmed by Gennady Perepada, a colorful New York broker who prefers the term international real estate consultant.

“Six months ago, eighty percent of my clients were purchasing luxury condos. Now, [that same majority] are buying cheaper properties for income generation,” he said in Russian-accented English.

Perepada described his client base as 75 percent from the former Soviet Union. He called them “normal rich people, regular millionaires, not oligarchs.”

But the shift incorporates more than Russia’s “normal rich.”

According to Mermelstein, it includes a flight to safety by “highly exposed clients” who are now lying low. “If you’re in Russia, you don’t want to announce large, visible purchases in a country you are virtually at war with,” he said, referring to the U.S.

Uncertain future

In the wake of President Putin’s annexation of Crimea and continued threats over eastern Ukraine, Russia’s business class is nervous.

Many worry the country will be cut off from the global financial system or that more banks will close. Visa and MasterCard have already stopped processing a limited number of Russian transactions in response to U.S. sanctions.

“Putin is going to find [himself] in stark contrast to the mass of the elite, which is on the whole integrated into the world economy,” Mark Galeotti, a professor at New York University, told Radio Free Europe last month.

All this leads many a wealthy Russian to seek out deals in, say, New York, a city they regard as relatively cheap compared to other global capitals, and where brokers like Perepada know what his clients are looking for: high ceilings, good location, full service amenities and no frills transactions.

Properties in Manhattan, Long Island and The Hamptons make up the majority of his business, with the rest in high-rent Miami districts like Fisher Island – a small, highly exclusive islet accessible only by private ferry where security guards check photo IDs against a guest list.

Mark Snowiss is a Washington D.C.-based multimedia reporter. He has written and edited for various media outlets including Pacifica and NPR affiliates in Los Angeles. Follow him on Twitter @msnowiss and on Google Plus.